A sharp decline in German industrial output in April and a levelling off in foreign demand appeared to signal the recent growth spurt in Europe's largest economy slipped down a gear this spring.
German industrial production unexpectedly suffered its biggest fall in nearly seven years in April, preliminary data on Friday showed, while April export growth also fell short of expectations.
"What we're seeing now is what might have been expected to happen quite some time ago," said Dirk Chlench, an economist at Essen Hyp. "The economy is slowing down perceptibly."
The 2.3 percent fall in industrial output was the first monthly decline in six months and the biggest since June 2000. A Reuters poll had forecast a 0.6 percent monthly rise.
By contrast, exports rose 0.9 percent on the month in adjusted terms to 79.8 billion euros ($107.7 billion), official data showed. Imports increased by 0.8 percent to 64.0 billion euros. Both gains were lower than had been expected by analysts.
The growth in exports came despite the euro's surge against the dollar to a record high in April, but the monthly volume of goods sold abroad has barely changed since September.
Chlench said a combination of rising interest rates, high oil prices and the euro's appreciation against both the dollar and the yen would inevitably hamper German growth. Firms were also coping with slower growth in the United States, he added.
Although forward-looking surveys of firms and investors have been overwhelmingly upbeat, recent hard data has disappointed. Manufacturing orders fell by more than expected in April, while unemployment rose in May to end a run of 13 consecutive monthly falls. A survey also showed construction activity declined last month for the second month in a row.
German growth reached a six-year high of 2.8 percent last year and leading think tanks don't expect a significant slowdown in 2007. Despite a sharp rise in sales tax in January, GDP grew by 0.5 percent during the first quarter, and hopes are high that private consumption will pick up in the April-June period.
Nevertheless, Essen Hyp's Chlench said that on the basis of the latest data available growth would likely slow to around 0.4 percent in the second quarter.
Economists say net trade, which dragged down growth in the first quarter, could have a positive impact on the second.
Matthias Rubisch, an economist at Commerzbank, said the latest figures showed companies were facing weaker US demand. "(This) is not that surprising given the weaker growth over there," he said. "Imports were not that strong and therefore it looks like we will have a positive contribution to growth from foreign trade in the second quarter."
A number of firms have said the euro's rise against the dollar has curbed business. The single currency hit a record high above $1.3680 in late April. A breakdown of the trade figures showed exports to countries in the European Union rose 13.7 percent during the January-April period, and to countries outside the region by 7.8 percent.
Companies are still seeing strong demand from abroad. German industrial group MAN last week booked an order from Russia's JSC TransKreditBank for 1,000 heavy trucks.